The ACIT, Circle-2,, Surat v. M/s. Priyanka Polyster, Surat

ITA 3122/AHD/2009 | 2006-2007
Pronouncement Date: 04-11-2011 | Result: Dismissed

Appeal Details

RSA Number 312220514 RSA 2009
Assessee PAN AAHFP4085P
Bench Ahmedabad
Appeal Number ITA 3122/AHD/2009
Duration Of Justice 1 year(s) 11 month(s) 11 day(s)
Appellant The ACIT, Circle-2,, Surat
Respondent M/s. Priyanka Polyster, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 04-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 04-11-2011
Date Of Final Hearing 05-10-2011
Next Hearing Date 05-10-2011
Assessment Year 2006-2007
Appeal Filed On 23-11-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD .. !'# $ $ $ $ %% % & ' ( # BEFORE SHRI G.D.AGARWAL VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT JUDICIAL MEMBER $./ I.T.A.NO.3122/AHD/2009 ( * * * * / / / / ASSESSMENT YEAR : 2006-07) ASSTT.CIT CIRCLE-2 SURAT / VS. M/S.PRIYANKA POLYSTER 3/3973 NAGARDAS NI SHERI NAVAPURA SURAT '+ ( $./- $./ PAN/GIR NO. : AAHFP 4085 P ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : DR. JAYANT JHAVERI SR.D.R. /0+. 2 1 ( / RESPONDENT BY : SHRI R.B. SHAH A.R. % 3 2 & / / / / DATE OF HEARING : 05/10/2011 45* 2 & / DATE OF PRONOUNCEMENT : 04/11/2011 (6 / O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-II SURAT DATED 25/08/2009 AND THE SOLITARY SUBSTANTIAL GROUND READ S AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE AO ON ACCOUNT OF SUPPRESSION OF SALES OF RS.72 39 623/ - AND UNDERVALUATION OF STOCK OF RS.27 757/-. ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPOND ING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 DATED 12 .12.2008 WERE THAT THE ASSESSEE-CONCERN IS IN THE BUSINESS OF TEXTURIZING AND TRADING OF YARN. DURING THE YEAR THE ASSESSEE HAS SHOWN TO HAVE PRO DUCED TEXTURISED YARN OF 1045713.86 KG OUT OF OPENING STOCK OF RAW MATERI AL OF 8736.18 KG AND PURCHASES OF 1040985.9 KG. THE TOTAL RAW MATER IAL UTILIZED FOR PRODUCTION STANDS AT 1049721.08 KG. AS PER THE TRA DING A/C THE ASSESSEE HAS SHOWN TOTAL SALES OF RS.105753168 REFLECTING GP AT 2.74%. HOWEVER THE ASSESSEE HAS BOOKED A NET LOSS OF RS.1 6 69 890/- ON A GROSS PROFIT OF RS.28 99 634/-. FROM THE DETAILS FURNISH ED BY THE ASSESSEE THE AO COMPARED THE MONTHLY CONSUMPTION OF ELECTRICITY IN TERMS OF UNITS WITH MONTH-WISE PRODUCTION OF SIZED YARN. THE ASSE SSEE PRODUCED COMPUTERIZED LEGERS CASH BOOK BANK BOOK PURCHASE AND SALES BILLS AND STRONGLY OBJECTED TO THE ADOPTION OF AVERAGE PRODUC TION @ 2.12 KG. PER UNIT OF ELECTRICITY. THE AO NOTED THAT ON ONE HAN D THE ASSESSEE FIRM HAS ACHIEVED PRODUCTION 2.12 KGS 2.17 KGS AND 2.4 2 KGS OF YARN IN THE MONTHS OF OCTOBER JULY AND MAY RESPECTIVELY AND O N THE OTHER HAD ACHIEVED PRODUCTION OF 1.46 KGS 1.45 KGS AND 1.67 KGS OF YARN IN THE MONTHS OF JUNE 2005 NOVEMBER 2005 AND FEBRUARY 2006 RESPECTIVELY. THE AO FURTHER NOTED THAT EVEN BY THE ASSESSEES O WN STANDARDS THE MAXIMUM AND MINIMUM PRODUCTION IN A MONTH WAS SHOWN AT 1.99 KG AND 1.59 KG PER UNIT RESPECTIVELY. ACCORDING TO TH E AO THE VARIATION OF 0.40 KG PER UNIT CLEARLY INDICATED THE DISCREPANCY IN THE FIGURES OF PRODUCTION SHOWN BY THE ASSESSEE. THE CONSUMPTION OF ELECTRICITY WAS 47 260 UNITS FOR PRODUCTION OF 75 138.530 KGS OF YA RN IN THE MONTH OF DECEMBER AS AGAINST 54 300 UNITS FOR THE PRODUCTIO N OF 1 07 850.800 KGS IN THE MONTH OF AUGUST. ACCORDING TO THE AO THE A SSESSEE WAS UNABLE ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 3 - TO JUSTIFY SUCH VARIATIONS IN THE PRODUCTION PER UN IT OF ELECTRICITY IN DIFFERENT MONTHS. THE AO ALSO NOTED THAT THERE W ERE DIFFERENCES IN THE CLOSING STOCK OF RAW MATERIALS AND FINISHED GOODS A T DIFFERENT STAGES. THE ASSESSING OFFICER THEREFORE REJECTED THE BOOK RESUL TS U/S.145(3) OF THE IT ACT. WHILE DOING SO SHE PLACED RELIANCE ON CERTAI N CASE-LAWS. AFTER HAVING REJECTED THE BOOKS THE AO OBSERVED THAT FO LLOWING THE BASE OF 1.99 KG PER UNIT AS REFLECTED IN THE MONTH OF AUGUS T 2005 THERE WAS A VISIBLE EVIDENCE WITH RESPECT TO SUPPRESSED SALES O F 93 535.18 KGS. THE VARIATION AT THE MAXIMUM COULD NOT EXCEED 10%. THE AO THUS REDUCED 10% OF THE PRODUCTION OF YARN AND ARRIVED AT THE F IGURE OF 84 181.662 KGS AND APPLYING THE AVERAGE SELLING PRICE OF RS.8 6 PER KG WORKED OUT THE SUPPRESSION OF SALES AT RS.72 39 623 WHICH THE ASSESSING OFFICER ADDED TO THE ASSESSEES TOTAL INCOME. 3. ON APPEAL THE CIT(A) HELD AS UNDER:- 6.1. IT IS QUITE CLEAR FROM THE DETAILED SUBMISSIO NS OF THE AR THAT IN COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESS EE HAS PAINSTAKINGLY FURNISHED NOT ONLY THE COMPLETE SET O F BOOKS OF ACCOUNT BUT ALSO DETAILED WORKINGS FROM VARIOUS ANG LES AS PER THE REQUIREMENTS OF THE AO FROM TIME TO TIME. IT IS O NLY ON THE BASIS OF THE DETAILS FURNISHED BY THE ASSESSEE THAT THE A O WAS ABLE TO DRAW HERE CONCLUSIONS HOWEVER ERRONE1OUS. THIS IS EVIDENCED BY THE NUMEROUS CHARTS REPRODUCED THROUGH OUT THE BODY OF THE ASSESSMENT ORDER. THEREFORE IT COULD NOT EITHER B E SAID THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OR EVEN T HAT COMPLETE DETAILS WERE NOT FURNISHED. THE FACT REMAINS THAT IN SPITE OF ALL SUCH ANALYSIS THE AO WAS NOT REALLY ABLE TO POINT OUT ANY DEFECT EITHER IN THE BOOKS OR THE DETAILS FURNISHED. ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 4 - 6.2 THE MAIN GROUND TAKEN BY HER PERTAINED TO A COMPARISON OF THE PR1ODUCTION TO THE ELECTRICITY CONSUMPTION EACH MONTH WHICH HAS ALREADY BEEN DISCUSSED IN THE PRECEDING PARAS. ALL THE OTHER GROUNDS APPARENTLY WERE ADDED ON BY HER TO STRENGTH EN HER CASE THAT THE ASSESSEE HAD SUPPRESSED PRODUCTION AND HEN CE SALES. ALL SUCH GROUNDS HAVE BEEN ADEQUATELY AND SUFFICIENTLY DEALT WITH AN REPLIED TO BY THE AR IN HIS WRITTEN SUBMISSION WH ICH HAS BEEN DISCUSSED ABOVE IN CONSIDERABLE DETAIL AND HENCE N EED NOT BE REPEATED HERE. SUFFICE TO SAY THAT THERE WAS SIMPL Y NO MERIT IN THE AO'S OBSERVATIONS AND FINDINGS NOT ONLY IN CONNECTI ON WITH THE AVERAGE PRODUCTION PER UNIT OF ELECTRICITY PER MONT H BUT ALSO IN HER WORKING OF THE ALLEGED DIFFERENCE IN THE CLOSIN G STOCK THE SO- CALLED DELIBERATE LOSS INCURRED BY THE ASSESSEE IN THE MANUFACTURING THE LOW OIL GAIN THE DIFFERENCE IN THE PROFIT MARGIN BETWEEN THE MANUFACTURING AND THE TRADING ACTIVITIE S THE ALLEGED SUPPRESSION OF SALES ON THE BASIS OF THE OCTROI EXP ENSES INCURRED EACH MONTH AND FINALLY HER WORKING OF THE SUPPRESS ION OF SALES. THE ASSESSMENT ORDER UNFORTUNATELY IS PEPPERED WITH CERTAIN VERY UNSUBSTANTIATED STATEMENTS SUCH AS THAT THE AUDITO RS HAD GIVEN THEIR REPORT ON THE BASIS OF RECORDS WHICH WERE EIT HER NOT IN EXISTENCE OR IF THEY WERE IN EXISTENCE WERE INCOMPL ETE INCORRECT AND INGENUINE (PARA-18) WHERE THE OCTROI EXPENSES WERE LESS THAN 1.5% OF SALES THE SALES HAD BEEN EFFECTED OUTSIDE THE CITY LIMITS AND HENCE NO ACCOUNTED FOR (PARA-20) AND THAT T HE ASSESSEE HAD DELIBERATELY HIDDEN THE ACTUAL PURCHASES OF POY YARN PRODUCTION AND SALES (PARA-12) ETC.ETC. 4. HEARD BOTH THE SIDES. FEW FACTS EMERGED FROM T HE COMPILATION FILED BEFORE US SUCH AS THE ASSESSEE HAS FURNISHED MONTH-WISE DETAILS OF STOCK OIL PURCHASE AND ELECTRIC POWER CONSUMPTION. ON THE BASIS OF THE RECORDS FURNISHED BEFORE THE AO THUS THE VEHEMENT CONTENTION OF THE ASSESSEE WAS THAT THE PURCHASES WERE MADE ONLY FROM TWO PARTIES; NAMELY M/S.RELIANCE INDUSTRIES LTD. AND M/S.LAKHANI SYNTHE TICS PVT.LTD.. IT WAS ALSO STATED THAT ALL THE PURCHASES WERE MADE THROUG H ACCOUNT PAYEE CHEQUES. SIDE-BY-SIDE ASSESSEE HAS ALSO FURNISHE D THE DETAILS OF THE SALES AND IN RESPECT OF THE SALES EXCEEDING RS.50 0 00/- THE ASSESSEE HAS ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 5 - FURNISHED THE NAMES AND ADDRESSES OF ALL THE PARTIE S. IN OTHER WORDS ALL THE PURCHASES AS WELL AS ALL THE SALES WERE CLAIMED TO BE VERIFIABLE AND NO DEFECT WAS POINTED OUT BY THE ASSESSEE. WE HAVE ALSO PERUSED THE WORKING OF THE AO THROUGH WHICH IT WAS ALLEGED THAT THERE WAS DISCREPANCY IN THE AVERAGE PRODUCTION VIS--VIS AVE RAGE PER UNIT CONSUMPTION OF ELECTRICITY PER MONTH. BUT ACCORDIN G TO US THAT WORKING ITSELF HAD CERTAIN SHORT-COMINGS AND THE CRITERIA O F DETECTION OF SUPPRESSION OF SALES WAS NOT JUSTIFIABLE. BEFOR E US FEW DECISIONS OF THE TRIBUNAL HAVE BEEN FURNISHED TO DEMONSTRATE THAT WH ENEVER SUCH AN OCCASION HAD ARISEN WHERE THE REVENUE DEPARTMENT HA S MADE THE ADDITION IN RESPECT OF THE ASSESSEE ENGAGED IN TEXT URISING OF YARN AND IT WAS NOTED THAT THERE WAS ALLEGED DISCREPANCY OF CO NSUMPTION OF ELECTRICITY THE RESPECTED ITAT AHMEDABAD BENCHES H AVE HELD THAT THERE WAS NO JUSTIFICATION FOR REJECTION OF BOOK RESULTS SO AS TO ALLEGE SUPPRESSION OF PRODUCTION. IN ONE OF SUCH CASE ITAT C BENCH AHMEDABAD IN THE CASE OF ITO VS. M/S.PARAS AGRO PR ODUCTS (ITA NO.828/AHD/2009 A.Y. 2005-06) VIDE ORDER DATED 07 /01/2011 IT WAS HELD AS UNDER:- 4. IN THE LIGHT OF THE ABOVE DISCUSSION WE HAVE H EARD BOTH THE SIDES AND ALSO PERUSED THE MATERIAL PLACED BEFORE U S. ADMITTED FACTUAL POSITION IS THAT MERELY ON THE BASIS OF SOM E VARIATION IN FEW MONTHS IN THE ELECTRICITY CONSUMPTION THE ASSESSI NG OFFICER HAD MADE THE IMPUGNED PRESUMPTIVE ADDITION BY WRONGLY H OLDING THAT THERE OUGHT TO BE CORRESPONDING UNACCOUNTED PURCHAS ES . IN THIS REGARD A SPECIFIC QUERY HAS BEEN RAISED BY THE BEN CH DURING THE COURSE OF HEARING THAT WHETHER BEFORE MAKING AN ADD ITION THE ASSESSING OFFICER HAS FOUND ANY DEFECTS IN THE BOOK S OF ACCOUNT OR WHETHER THE PROVISIONS OF SECTION 145(3) WERE INVOK ED FOR REJECTION OF BOOKS OF ACCOUNT. FROM THE SIDE OF THE REVENUE NO SATISFACTORY REPLY WAS SUBMITTED. ON THE OTHER HAND LEARNED AU THORISED REPRESENTATIVE HAS STRONGLY OBJECTED THE MANNER IN WHICH THE ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 6 - IMPUGNED ADDITION WAS MADE. IN ADDITION TO THE CAS E LAWS CITED BY THE LEARNED CIT(APPEALS) THE LEARNED AUTHORISED RE PRESENTATIVE HAS ALSO RELIED UPON A DECISION OF ITAT BENCH A A HMEDABAD IN THE CASE OF SAUMIL TRADERS PVT.LTD. VS. ITO BEARING ITA NOS.59/AHD/2005 & 2285/AHD/2006 FOR ASSESSMENT YE AR 2001- 02 DATED 03/03/2009 WHEREIN IT WAS OPINED THAT ME RELY BECAUSE OF HIGHER CONSUMPTION OF ELECTRICITY OUTRIGHT THE B OOKS OF ACCOUNT COULD NOT BE REJECTED . ONCE THE BOOKS HAVE BEEN P REPARED ON THE BASIS OF THE BILLS AND VOUCHERS AND THERE IS NO ALL EGATION THAT EITHER THE PURCHASE OF RAW-MATERIAL OR PRODUCTION W AS FOUND UNRECORDED THEN THERE WAS NO REASON FOR AN ADDITIO N THAT TOO ON PRESUMPTIONS. CONSIDERING THE TOTALITY OF THE BOOK RESULT IT CAN ALSO BE OPINED THAT IF NO DISCREPANCY IS FOUND IN THE AVERAGE CONSUMPTION OF PRODUCTION AND THE BOOK RESULTS ARE BASED UPON THE DETAILS OF MANUFACTURING ACTIVITY ETC. THEN AL SO THERE WAS NO REASON FOR SUCH A PRESUMPTIVE ADDITION. THE LEARN ED AUTHORISED REPRESENTATIVE HAS ALSO MENTIONED THAT ONE SLP OF THE REVENUE IN THE CASE OF FLEXI PACK 319 ITR 03 (STATUTE) HAS ALSO BEEN REJECTED WITH THE OBSERVATION THAT NO SUBSTANTIAL Q UESTION OF LAW AROSE FROM THE ORDER OF THE TRIBUNAL AND THAT THERE WAS NO QUESTION OF GOING INTO ESTIMATION WITHOUT REJECTIO N OF THE BOOKS WHICH HAD BEEN PROPERLY MAINTAINED IN THE REGULAR C OURSE. IN THAT CASE AS WELL THE TRIBUNAL HAD HELD THAT THE AS SESSING OFFICER HAD NOT INVOKED THE PROVISIONS OF SECTION 145 OF TH E I.T.ACT THEREFORE THERE WAS NO JUSTIFICATION FOR NOT ACCEP TING BOOK RESULTS. IN THE RESULT CONSIDERING THE TOTALITY OF THE CIRC UMSTANCES OF THE CASE AS ALSO THE CASE LAWS REFERRED HEREINABOVE WE ARE OF THE CONSCIENTIOUS VIEW THAT THE LEARNED CIT(APPEALS) HA S RIGHTLY REVERSED THE FINDINGS OF THE ASSESSING OFFICER. W E HEREBY CONFIRM THE VIEW TAKEN BY THE LEARNED CIT(APPEALS). THIS G ROUND OF THE REVENUE IS THEREFORE DISMISSED. 4.1. LIKE WISE IN THE CASE OF ITO VS. M/S.NEMCON T EXTURISERS (IN ITA NO.4593/AHD/2007 A.Y. 2004-05) DATED 13/05/2011 IT WAS HELD THAT IN THE ABSENCE OF ANY SPECIFIC DEFECT THERE WAS NO REASONABLE BASIS TO REJECT THE BOOKS OF ACCOUNTS MERELY ON THE GROUND O F VARIATION IN THE ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 7 - CONSUMPTION OF ELECTRICITY. SIMILARLY IN THE CA SE OF ITO VS. M/S.GOVIND PROCESSORS THE ITAT D BENCH BEARING I TA NO.3307/AHD/2007 FOR A.Y. 2004-05 DATED 18/02/2007 HAS HELD THAT MERELY ON NON-MAINTENANCE OF CONSUMPTION REGISTER T HE ESTIMATION OF PROFIT WAS INCORRECT. IT WAS HELD THAT WHEN THE C OMPLETE DETAILS OF PURCHASE AND SALE WERE AVAILABLE AND THE ASSESSEE H AS FURNISHED THE DETAILS OF CONSUMPTION OF MATERIAL THEN THE AO WAS NOT JUSTIFIED IN REJECTING THOSE BOOKS OF ACCOUNTS AND ESTIMATING TH E PROFIT EARNED. UNDER THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE AND ON CAREFUL APPRECIATION OF THE FACTS WE ARE OF THE CONSCIENTI OUS VIEW THAT LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION. WE HEREBY UPHOL D THE VIEW TAKEN BY THE LD.CIT(A) AND DISMISS THIS GROUND OF THE REVENU E. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 4 TH NOVEMBER 2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 4 TH NOV. 2011 ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- AKG MKS (AM) (JM) 4.11.11 7.. . ../ T.C. NAIR SR. PS ITA NO. 3122/AHD/2009 ASST.CIT VS. M/S.PRIYANKA POLYSTER ASST.YEAR - 2006-07 - 8 - (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*& (6 2 /&8 (8*&/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. $$ & %9 / CONCERNED CIT 4. %9() / THE CIT(A)-II SURAT 5. 8<= /& / DR ITAT AHMEDABAD 6. = >3 / GUARD FILE. (6 % (6 % (6 % (6 % / BY ORDER 08& /& //TRUE COPY// ! !! !/ // / $ $ $ $ ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION.. 5/10/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07/10/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S 4.11.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 4.11.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER